Crowdfunding is heating up in Singapore with more and more projects lining up for investors to choose from. Given that the property and stock markets are performing badly, some investors may be interested to turn to alternative investments such as crowdfunding.
That said, crowdfunding has yet to reach the early majority.
This is understandable as crowdfunding has not been regulated by the Monetary Authority of Singapore (MAS) (yet), and most investors tend to be cautious and prefer to sit out at the moment.
Also, investors may not comprehend and accurately assess the credit risks that they might be exposed to. Would their portfolio of crowdfunding projects be able to withstand the default rate and edge out a positive return?
[Free Ebook] How should you invest your first $20,000?
We asked 14 Singapore finance bloggers to share what they would do if they could go back in time and invest their first $20,000. They can no longer rewind time, but you can learn from their experience and hopefully start with a better footing.
Thinking about these questions is certain enough to tire the potential investor, and the easiest thing is to do nothing.
But what if you can try crowdfunding without risking your money?
CoAssets launched the CoAssets Tokens (CAT) project in recent weeks and you can claim up to 1,000 CAT tokens to invest in 3 simulated crowdfunding projects.
Before you dismiss it as just a game, there is actually real money returns!
Here is the screen shots of my potential interest collection:
It isn’t a lot of money, but it allowed me to get a feel of crowdfunding without any capital from my side. And the interest of S$10 is still good lunch money 🙂
How Did I Choose the Projects to Fund
CoAssets has created 3 fictitious projects for this purpose; a Fast Moving Consumer Goods (FMCG) company, a Food & Beverage (F&B) company and a real estate developer; each looking for a one-month loan with 12% interest annualised.
I have chosen to fund the FMCG and F&B projects and here were my guiding principles:
Diversification – Think of yourself as an insurance company. You do not know which client will pass away early. But you know someone would. Hence, you would want to get as many clients as possible and charge an appropriate premium to afford the payouts when a few of them die. Similarly, some of the loans would default but it is difficult to know with certainty in advance. The safer approach is to invest a little bit in many projects.
I would choose to invest in all 3 projects but I decided to drop the property project, and the next principle explains.
Cash Flow – The loan period in this simulation is short, about 1 month. I would assume the companies need working capital in the short term, to tide them over before the business generates the cash flow. This means that I should only look at companies which can collect most of the cash in the short term. FMCG and F&B are two businesses that fall into this category, while the property developer is unlikely to complete the project or a milestone within a month (unless specifically stated so). Hence, the chances of generating the cash flow within a month would be difficult for the property developer.
With these two principles, I have narrowed the investments into FMCG and F&B.
Head on to CoAssets now to claim the free tokens. You have about 5 days left.